OVERVIEW

In November the University reported to the Regents that
the Designated account for its Athletics program recorded a FYE01 deficit of
$543,015. For that same period, the
State General Operating account for the Athletics program recorded a FYE
deficit of $493,828, creating a total FYE deficit of $1,036,843.

Several
months prior to the Board of Regents meeting in November, the University had
initiated an aggressive process of analysis and planning with the dual
objectives of eliminating the FYE01 deficit and developing a plan to establish
and sustain an Athletics budget that maintains a positive balance on an annual
basis. During the initial stage of this
process, the University hired an independent consultant to review the budget
and the operations of the Athletics program.
Then, for the past several months, the Athletic Director and the Vice
President for Student Affairs have been collaborating with the leadership of
the University, the Bobcat Boosters, and ASMSU to construct a multifaceted,
balanced budget plan. This has now been
accomplished, and the plan has been endorsed by all involved, including the University
Planning, Budget & Analysis Committee (UPBAC).

The
Athletics program has been operating in a deficit status since FY98. However, at this time the University is
confident that the Athletics Director and the Vice President for Student
Affairs have developed a plan to successfully eliminate the FYE01 deficit and
establish an Athletics budget that maintains a positive balance on an annual
basis.

ELIMINATION OF DEFICIT

The
$1,036,843 deficit will be eliminated during the current fiscal year, with a
one-time transfer of Other Lawful Purpose (OLP) funds. These funds are available because when the
Phase I Stadium & Fieldhouse Bond Fund was closed, it contained a $1.8
million balance of unexpended investment earnings that were generated during
the course of the project. Under the
term of the indenture, these funds can be used to fund the $2.2 million
Fieldhouse re-roof project – and a similar amount of (OLP) funds originally
accumulated for the Fieldhouse re-roof project can be released for other
purposes, including the elimination of the Athletics program deficit.

In addition
to the $1,036,843 transfer, OLP funds will also be used in two other ways to
support the Athletics program budget. A
total of $344,006 will be used to pay the remaining debt on the Stadium
scoreboard and sound system, which will relieve the operations budget from loan
payments in FY 2002, 2003, 2004 and 2005.
Also, $100,000 will be earmarked for a construction project to create up
to four additional Stadium skyboxes, which will generate $24,000 annually in
additional lease revenue.

SUSTAINABLE POSITIVE BUDGET BALANCE

Developing
a plan to establish a budget with a sustainable positive balance was much more
challenging than finding a solution for eliminating the current deficit. The key characteristic of the University’s
plan is that it is a broad-based solution which includes a Base reduction of
$171,000 in operations expenditures, and depends upon the enhancement of
revenues from numerous sources.

The planned
annual revenue enhancements include $24,000 from the added skyboxes; $16,000
from lease increases on existing skyboxes; $105,000 from a $1.00 surcharge on
all athletic tickets; $120,000 from University General Operations, to fund the
costs of central services (security, snow removal, building insurance, etc.)
that Athletics has had to pay for in the past; $50,000 to $100,000 in
additional Major Gifts revenue; $60,000 from major concerts or other
entertainment events; $33,000 in added concession sales; $20,000 in added
Corporate Sponsorships; $58,000 in added Booster support; and, $195,000 in
increased Student Athletic Fees.

The current
student fee is $31.75 per semester.
Except for a $1.75 adjustment in August 2001, the fee has remained
constant since its inception in 1993.
Under this plan, the fee will increase by $10.00 per semester in FY
2003, and then $7.50 per semester in FY 2004, 2005 and 2006.

Even after
these proposed increases, the MSU Athletic Fee will still be less than the
current fees at many other Big Sky Conference campuses. In FY 2006 the MSU annual fee will be
$128.50. This is in comparison to the
following FY 2002 fees: $144.00 at EWU, $198.00 at ISU, $141.00 at PSU, $103.00
at Sacramento State, and $79.00 at Weber State. NAU does not have a student fee, but their Athletics program
receives “discretionary funds” from the University President.

As per the University’s pledge to ASMSU, the revenue from
this increase will be expended for athletic scholarships, academic center
support and preseason room and board costs.
Since its inception, all revenue from this Student Fee has been transferred
into the Athletics operations account.
None of this revenue has ever been used to cover debt service payments.